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Should agriculture be exempt from trade policy reforms in South Asia?

Author

Listed:
  • Sumudu Perera

    (UNE Business School, University of New England, Armidale, New South Wales 2351, Australia)

  • Mahinda Siriwardana

    (Corresponding author, UNE Business School, University of New England, Armidale, New South Wales 2351, Australia)

  • Stuart Mounter

    (UNE Business School, University of New England, Armidale, New South Wales 2351, Australia)

Abstract

Contracting parties to the Agreement on South Asian Free Trade Area (SAFTA) are committed to trade liberalization within a fixed time frame. Most contracting parties have kept agriculture out of their tariff liberalization commitments. A key question therefore is: should agriculture receive dispensation given the sector's important contribution to South Asia's economic structure? An enhanced multi-household framework within a multi-country computable general equilibrium (CGE) approach was used to assess the impacts on trade flows, government fiscal revenues and income distribution among households in countries that are contracting parties to SAFTA, assuming full trade liberalization and trade liberalization with the protection of the agricultural sector. The results indicate that, although both policies would facilitate economic growth and lead to a reduction in income disparity among household groups in all South Asian countries, the overall welfare gains would be greater under full trade liberalization. Hence, the removal of agricultural sector tariffs should be an important consideration in future SAFTA discussions; such a step would be a principal means for strengthening intraregional trade.

Suggested Citation

  • Sumudu Perera & Mahinda Siriwardana & Stuart Mounter, 2014. "Should agriculture be exempt from trade policy reforms in South Asia?," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 21(1), pages 67-106, June.
    • Handle: RePEc:unt:jnapdj:v:21:y:2014:i:1:p:67-106
    as

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    File URL: http://www.unescap.org/sites/default/files/4-Part3-Perera.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Agricultural sector; income distribution; multi-country computable general equilibrium (CGE) model;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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